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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
Match each statement with the correct term.
Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.
This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Derived Demand
Excess Capacity
Least-Cost Rule
Absolute Advantage
2. 0 < Ei < 1
Dead Weight Loss
Necessity
Market power
Income Effect
3. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus
Price Elasticity of Supply
Marginal Cost (MC)
Price floor
Free-Rider Problem
4. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Marginal Cost (MC)
Determinants of Labor Demand
Market Equilibrium
5. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Accounting Profit
Positive externality
Average Product of Labor (APL)
Non-collusive oligopoly
6. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Necessity
Price Ceiling
Least-Cost Rule
Break-even Point
7. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Monopoly long-run equilibrium
Production function
Subsidy
Total Product of Labor (TPL)
8. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good
Average Fixed Cost (AFC)
Law of Demand
Spillover costs
Derived Demand
9. The imbalance between limited productive resources and unlimited human wants
Marginal Benefit (MB)
Break-even Point
Inferior Goods
Scarcity
10. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Determinants of elasticity
Consumer surplus
Determinants of Demand
Marginal Product of Labor (MPL)
11. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Least-Cost Rule
Income Effect
Inferior Goods
Profit Maximizing Resource Employment
12. Exists if a producer can produce more of a good than all other producers
Oligopoly
Perfectly competitive long-run equilibrium
Fixed inputs
Absolute Advantage
13. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Cross-Price Elasticity of Demand
Substitution Effect
Variable inputs
Perfectly elastic
14. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Cartel
Unit elastic demand
Total Fixed Costs (TFC)
Diseconomies of Scale
15. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Decreasing Cost industry
Monopolistic competition
Public goods
Cartel
16. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Determinants of elasticity
Total Welfare
Law of Increasing Costs
Perfectly inelastic
17. Exists if a producer can produce a good at lower opportunity cost than all other producers
Unit elastic demand
Monopoly
Short run
Comparative Advantage
18. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Long Run
Constant Returns to Scale
Law of Increasing Costs
Negative externality
19. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Price inelastic demand
Average Product of Labor (APL)
Price floor
Natural Monopoly
20. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run
Shutdown Point
Price elasticity
Total Welfare
Average Product of Labor (APL)
21. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Free-Rider Problem
Market Economy (Capitalism)
Price elasticity
Incidence of Tax
22. Models where firms agree to mutually improve their situation
Increasing Cost Industry
Collusive oligopoly
Long Run
Spillover benefits
23. Costs that change with the level of output. If output is zero - so are TVCs.
Free-Rider Problem
Negative externality
Price Ceiling
Total variable costs (TVC)
24. The rational decision maker chooses an action if MB = MC
Marginal Analysis
Constant Returns to Scale
Total Welfare
Monopoly long-run equilibrium
25. Entry of new firms shifts the cost curves for all firms upward
Increasing Cost Industry
Marginal Productivity Theory
Least-Cost Rule
Profit Maximizing Rule
26. Occurs when LRAC is constant over a variety of plant sizes
Absolute prices
Average Variable Cost (AVC)
Market Economy (Capitalism)
Constant Returns to Scale
27. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Economies of Scale
Unit elastic demand
Substitute Goods
28. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received
Constrained Utility Maximization
Total Revenue Test
Total Revenue
Break-even Point
29. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Total Revenue Test
Price elasticity
Inferior Goods
Price elastic demand
30. The additional cost incurred from the consumption of the next unit of a good or a service
Determinants of Supply
Average Variable Cost (AVC)
Marginal Cost (MC)
Marginal Productivity Theory
31. The marginal utility from consumption of more and more of that item falls over time
Utility Maximizing Rule
Law of Diminishing Marginal Utility
Perfectly inelastic
Public goods
32. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Monopoly long-run equilibrium
Market Economy (Capitalism)
Fixed inputs
Constant Returns to Scale
33. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Opportunity Cost
Private goods
Subsidy
Allocative Efficiency
34. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Private goods
Average Product of Labor (APL)
Price Ceiling
Perfect competition
35. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income
Marginal tax rate
Subsidy
Spillover benefits
Shortage
36. When firms focus their resources on production of goods for which they have comparative advantage
Incidence of Tax
Normal Profit
Determinants of Supply
Specialization
37. A good for which higher income increases demand
Determinants of Labor Demand
Normal Goods
Increasing Cost Industry
Price Elasticity of Supply
38. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Surplus
Perfectly competitive long-run equilibrium
Shortage
Necessity
39. The additional benefit received from the consumption of the next unit of a good or service
Normal Goods
Allocative Efficiency
Marginal Benefit (MB)
Complementary Goods
40. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Total Fixed Costs (TFC)
Determinants of Supply
Cartel
Least-Cost Rule
41. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Constant Returns to Scale
Price elasticity
Natural Monopoly
Consumer surplus
42. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Natural Monopoly
Normal Goods
Marginal Revenue Product (MRP)
Perfectly competitive long-run equilibrium
43. Ed = 1
Marginal Revenue Product (MRP)
Perfect competition
Unit elastic demand
Price elasticity
44. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Accounting Profit
Substitute Goods
Complementary Goods
Average Variable Cost (AVC)
45. The difference between total revenue and total explicit and implicit costs
Inferior Goods
Price elastic demand
Economic Profit
Positive externality
46. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Surplus
Economics
Producer surplus
Public goods
47. The price of a good measured in units of currency
Public goods
Perfectly inelastic
Absolute prices
Free-Rider Problem
48. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Price discrimination
Producer surplus
Price floor
Allocative Efficiency
49. Exists at the point where the quantity supplied equals the quantity demanded
Perfectly inelastic
Market Equilibrium
Economic Growth
Perfectly competitive long-run equilibrium
50. Total product divided by labor employed. APL = TPL/L
Law of Increasing Costs
Average Product of Labor (APL)
Income Elasticity
Marginal Revenue Product (MRP)